Rocket Blasts Off In Massive Gamma, Short Squeeze Forcing Another “Hedge Fund VIP” Liquidation

Rocket Companies went to the moon today…

Just as we warned earlier, RKT was ‘Gamma Squeezed’ over 60% higher today…

“The Q4 results were good” analyst Donald Fandetti said, “But not good enough to support this move, which is the third trading day after earnings” 

As deep OTM calls (gamma squeeze) were bid in size ($45s thru $50s expiring in 2 weeks)…

Source: Bloomberg

Reddit comment volume for Rocket surged to nearly 19% of total comments on the forum WallStreetBets Tuesday, according to SwaggyStocks, a ticker and sentiment tracker.

Rocket was the fifth-most-mentioned company on the market social media platform Stocktwits today, at 3% of 271,666 stories carried on Bloomberg.

It was quite a run… the 3rd straight day of gains, pushing RKT up over 110%…

Source: Bloomberg

Largely thanks to this a massive short interest…

$RKT short interest is $1.21 BN
49.70M shares shorted
45.83% of Float
31.42% S3 SI% Float
29.32% fee & rising to over +50%
Shares shorted up +3.8M shares, worth $92M, +8.2%, last week.
Shorts down -$724M in 2021 mark-to-market losses; down -$497M on today’s +41% move pic.twitter.com/aXn4G6y4ZD

— Ihor Dusaniwsky (@ihors3) March 2, 2021

Almost $13 billion of volume traded today… umm…

Source: Bloomberg

KBW analyst Bose George also cautioned investors on the sharp rally in the stock.

“We remain cautious on Rocket and don’t believe there’s any fundamental reason for the big move up in the shares,” he said.

“As far as we can tell, this could be another case of day traders going after a heavily shorted name in order to drive a short squeeze.”

Notably, as RKT soared, it appears hedgies were forced to dump some of their favorites once again…

Source: Bloomberg

As RKT shares became extremely hard-to-borrow…

Source: Bloomberg

And while RKT was taking off, crude was crashing (OPEC+ headlines that “the market could handle more barrels”)…

And crypto was crushed, with Bitcoin tagging $50k overnight and sliding (some chatter that the drop around 11amET was driven by Gensler comments)…

Source: Bloomberg

And Ethereum fell back below $1500…

Source: Bloomberg

Stocks were all lower on the day with The Dow the least bad (clinging to unch until the last hour) as Small Caps and Nasdaq lagged (after yesterday’s biggest day in months)…

NOTE – selling was heavy at the Asia open, Europe open, and US open… and US close.

Nasdaq’s tumble left it right at its 50DMA…

Materials outperformed today as Tech lagged

Source: Bloomberg

Momentum rolled over again today after two days of gains…

Source: Bloomberg

Facebook stock tumbled late on after the CFO warned that recovery from COVID could stymie growth….

ARKK and TSLA tumbled today – but remain higher on the week…

Stock-Bond correlation (historically negatively related) reached extreme positive levels today…the last time correlation was this high was July 2017 and 10Y Yields crashed 40bps in the month following…

Source: Bloomberg

Treasuries were mixed today with the belly outperforming the tails (2Y unch, 5Y -3bps, 30Y +1bps)…

Source: Bloomberg

10Y Yields stuck in a narrow range for second day…

Source: Bloomberg

And as yields stabilize so bond implied vol tumbles…

Source: Bloomberg

Real yields have tumbled in the last three days, but gold (for now) is ignoring it…

Source: Bloomberg

The Dollar ended lower for the second day in a row – after another roller-coaster…

Source: Bloomberg

Gold managed modest gains as the dollar slipped…

And silver jumped back up towards $27…

 

Finally, if history is any guide, we are due for a pause in stocks. Ryan Detrick, chief market strategist at LPL Financial LLC said “History would say be open to some type of weakness or consolidation”…

 

Source: Bloomberg

The post cited the S&P 500 Index’s performance after bull markets that began in 1982 and 2009, the two fastest starters before the current advance. Both rallies faltered near the one-year mark, and the S&P 500 was little changed to lower six months later.